Fonterra units hold up in early trading, despite DCD scare

Fonterra units hold up in early trading, despite DCD
scare

By Pattrick Smellie

Jan 28 (BusinessDesk) -
Fonterra Shareholders Fund units took a small, immediate
knock as trading opened on the NZX this morning after a
weekend in which international media latched onto the news
that small traces of a nitrate inhibitor had been found in
some Fonterra milk powder.

FSF units dropped 0.41 percent,
or 3 cents, to $7.20 at the open of NZX trading, and bid and
ask prices were displayed briefly as low as $7.14 and $7.18
before recovering to a range of $7.20 and $7.23 in the first
10 minutes of trading and appeared to be holding those
levels.

Global investor reaction may yet occur in other
markets, although the Australian Stock Exchange is closed
today for a national holiday long weekend.

Despite
assurances the levels of the chemical, known as DCD, are far
below European Union food safety thresholds, the incident
has produced scare-mongering reports which Fonterra will now
have to work hard to counter.

Prime Minister John Key used
his weekly morning radio slot on Newstalk ZB to label some
international media reports as "misinformation" after highly
reputable sources such as the Wall Street Journal website
headlined reports with the question" "Is New Zealand milk
safe to drink?"

''The situation here is that there is no
health risk, at all," he said. "Key told Newstalk ZB he
would be concerned if international consumers reacted to
''misinformation''.

''The situation here is that there is
no health risk, at all," he said, echoing comments by
Fonterra chief executive Theo Spierings, who issued media
statements over the weekend to try and reassure export
markets.

''Once you get these sort of stories written,
even if they're incorrect, it's a big job to close them
down," said Key.

Theo Spierings said reactions were
''way out of proportion''.

Nitrous oxide is a greenhouse
gas produced by grazing stock and accounts for around 16
percent of the country's annual emissions contributing to
climate change. DCD has been used by some farmers to limit
such emissions, with nitrogen inhibitors being one of the
few technologies currently available to farmers to cut
emissions, which in total account for around half New
Zealand's total annual GHG
emissions.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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